A. H. Belo Corporation Announces Third Quarter 2012 Net Income

DALLAS--(BUSINESS WIRE)-- A. H. Belo Corporation (NYS: AHC) today reported net income of $0.06 per diluted share for the third quarter of 2012 compared to a net loss of $0.01 per diluted share in the third quarter of 2011. Third quarter 2012 net income includes a credit of $2.5 million for a consent judgment related to past tax assessments of real estate by the City of Providence.

Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization ("EBITDA") with pension expense added back, was $10.5 million in the third quarter of 2012, a decrease of 3 percent compared to the prior year period. As of September 30, 2012, cash and cash equivalents were $41 million, and the Company had no borrowings under its bank credit facility.

Robert W. Decherd, chairman, president and Chief Executive Officer, said, "Third quarter total revenue decreased 1 percent compared to the prior year quarter. This rate of decline is the lowest since our spin-off from Belo Corp. in 2008 and was driven by advertising revenue performance at The Dallas Morning News and increased printing and distribution revenues in Providence and Riverside.

"We are very pleased with our results thus far in 2012. While advertising revenues are difficult to predict, we remain confident in the Company's ability to deliver Adjusted EBITDA and generate cash. We continue to expect full-year 2012 Adjusted EBITDA of $37 to $41 million."

Third Quarter Results

Total revenue was $108.9 million in the third quarter of 2012, a decrease of 1 percent compared to the prior year period.

In the third quarter of 2011, The Dallas Morning News discontinued the niche publication Quick. When Quick's advertising revenue in the third quarter of 2011 is excluded, advertising revenue from ongoing niche publications increased 4 percent in the third quarter of 2012. This increase primarily resulted from higher advertising revenue at The Morning News' Spanish-language publication Al Día. Advertising revenue from niche publications is a component of the display, preprint, classified and digital revenue figures presented above.

Circulation revenue decreased 1.5 percent to $34.2 million in the third quarter of 2012 compared to the prior year period. Excluding $0.9 million of circulation revenue resulting from The Providence Journal's transition from a carrier model to a distributor circulation model in 2011, total circulation revenue decreased 4 percent to $33.3 million. This decrease is primarily driven by the single copy sales decline at The Dallas Morning News.

Printing and distribution revenue increased 25 percent to $12.5 million in the third quarter of 2012 due mostly to the impact of new contracts at The Providence Journal and The Press-Enterprise. The Company was notified in October 2012 that the new owners of the North County Times would cease printing that publication in the Riverside (Press Enterprise) productions facility on October 15, well before the expiration of a multi-year contract. The Company is pursuing multiple remedies.

Excluding the effect of pension expense in both periods, operating expense in the third quarter was $106.6 million, a 2 percent decrease compared to the prior year period as headcount related expenses, computer and depreciation expenses all decreased. Third quarter severance and related expenses totaled $0.3 million.

The Company's newsprint expense in the third quarter was $10.3 million, an increase of 1 percent compared to the prior year period. Newsprint consumption increased 1 percent to 16,348 metric tons. Compared to the prior year period, newsprint cost per metric ton dropped slightly, and the average purchase price per metric ton for newsprint decreased 2.3 percent.

Excluding the effect of pension expense in both periods, third quarter corporate and non-operating unit expenses were $5.4 million, a decrease of 2 percent compared to the prior year period.

Capital expenditures totaled $2.7 million in the third quarter. The Company anticipates full-year 2012 capital expenditures of approximately $10 million.

As of September 30, A. H. Belo had approximately 2,100 full-time equivalent employees, a decrease of 4 percent compared to the prior year period.

Dallas Initiatives

On September 10, The Dallas Morning News announced the formation of Speakeasy, a social content marketing agency that will develop, manage and execute turnkey social campaigns and promotions for both local and national businesses. The Company is majority owner of Speakeasy.

The Company moved forward with marketing campaigns at The Dallas Morning News during the third quarter. The Morning News anticipates investments in these marketing efforts will total $3.0 to $4.0 million this year.

Non-GAAP Financial Measures

Reconciliations of EBITDA and Adjusted EBITDA are included as exhibits to this release.

Conference Call

A. H. Belo will conduct a conference call on Monday, October 29 at 1:30 p.m. CDT to discuss financial results. The conference call will be available via webcast by accessing the Company's website (www.ahbelo.com/invest) or by dialing 1-800-288-8961 (USA) or 612-332-0107 (International). A replay line will be available at 1-800-475-6701 (USA) or 320-365-3844 (International) from approximately 3:30 p.m. CDT on October 29 until 11:59 p.m. CST on November 5, 2012. The access code for the replay is 259648.

About A. H. Belo Corporation

A. H. Belo Corporation (NYS: AHC) , headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that ownsand operates four daily newspapers and related websites. A. H. Belo publishes The Dallas Morning News, Texas' leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal, the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press-Enterprise (Riverside, CA), serving the Inland Southern California region and winner of one Pulitzer Prize; and the Denton Record-Chronicle. The Company publishes niche publications targeting specific audiences, and its investments and/or partnerships include Classified Ventures, owner of Cars.com, and the Yahoo! Newspaper Consortium. A. H. Belo also owns and operates commercial printing, distribution and direct mail service businesses. Additional information is available at www.ahbelo.com or by contacting Alison K. Engel, Senior Vice President/Chief Financial Officer, at 214-977-2248.

Statements in this communication concerning A. H. Belo Corporation's (the "Company's") business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, impairments, pension plan contributions, real estate sales, future financings, and other financial and non-financial items that are not historical facts, are "forward-looking statements" as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements.

Such risks, uncertainties and factors include, but are not limited to, changes in capital market conditions and prospects, and other factors such as changes in advertising demand and newsprint prices; newspaper circulation trends and other circulation matters, including changes in readership methods, patterns and demography, and audits and related actions by the Audit Bureau of Circulations; challenges implementing increased subscription pricing and new pricing structures; challenges in achieving expense reduction goals, and on schedule, and the resulting potential effects on operations; technological changes; development of Internet commerce; industry cycles; changes in pricing or other actions by existing and new competitors and suppliers; labor relations; regulatory, tax and legal changes; adoption of new accounting standards or changes in existing accounting standards by the Financial Accounting Standards Board or other accounting standard-setting bodies or authorities; the effects of Company acquisitions, dispositions, co-owned ventures, and investments; pension plan matters; general economic conditions and changes in interest rates; significant armed conflict; and other factors beyond our control, as well as other risks described in theCompany's Annual Report on Form 10-K for the year ended December 31, 2011, and other public disclosures and filings with the Securities and Exchange Commission.

A. H. Belo Corporation

Condensed Consolidated Statements of Operations

Three Months Ended

Nine Months Ended

September 30,

September 30,

In thousands, except per share amounts (unaudited)

2012

2011

2012

2011

Net operating revenues

Advertising and marketing services

$

62,123

$

65,229

$

186,373

$

203,034

Circulation

34,243

34,749

102,655

104,699

Printing and distribution

12,515

10,012

33,830

28,918

Total net operating revenues

108,881

109,990

322,858

336,651

Operating costs and expenses

Salaries, wages and employee benefits

43,364

44,958

131,992

143,552

Other production, distribution and operating costs

40,614

41,996

122,835

130,875

Newsprint, ink and other supplies

15,899

14,618

45,242

44,192

Depreciation

6,219

7,386

21,680

23,225

Amortization

1,309

1,310

3,929

3,930

Pension plan withdrawal

-

-

-

1,988

Total operating costs and expenses

107,405

110,268

325,678

347,762

Income (loss) from operations

1,476

(278)

(2,820)

(11,111)

Other income (expense), net

Other income, net

594

764

2,422

2,475

Interest expense

(128)

(132)

(506)

(510)

Total other income (expense), net

466

632

1,916

1,965

Earnings

Income (loss) before income taxes

1,942

354

(904)

(9,146)

Income tax expense

501

489

1,286

4,538

Net income (loss)

1,441

(135)

(2,190)

(13,684)

Net loss attributable to noncontrolling interests

(42)

-

(42)

-

Net income (loss) attributable to A. H. Belo Corporation

$

1,483

$

(135)

$

(2,148)

$

(13,684)

Net income (loss) per share attributable to A. H. Belo Corporation

Basic

$

0.07

$

(0.01)

$

(0.10)

$

(0.64)

Diluted

$

0.06

$

(0.01)

$

(0.10)

$

(0.64)

Average shares outstanding:

Basic

22,807

21,534

21,850

21,477

Diluted

22,928

21,534

21,850

21,477

A. H. Belo Corporation

Condensed Consolidated Balance Sheets

September 30,

2012

December 31,

In thousands

(unaudited)

2011

Assets

Current assets

Cash and cash equivalents

$

41,008

$

57,440

Accounts receivable, net

40,573

50,533

Other current assets

19,476

20,225

Total current assets

101,057

128,198

Property, plant and equipment, net

148,278

163,418

Intangible assets, net

37,603

41,532

Other assets

12,939

11,940

Total assets

$

299,877

$

345,088

Liabilities

Current liabilities

Accounts payable

$

11,985

$

18,062

Accrued expenses

28,067

30,167

Advance subscription payments

20,520

22,491

Total current liabilities

60,572

70,720

Pension liabilities

117,083

145,980

Other liabilities

5,597

6,909

Shareholders' Equity

A. H. Belo Corporation

116,540

121,479

Noncontrolling interests

85

-

Total liabilities and shareholders' equity

$

299,877

$

345,088

A. H. Belo Corporation

Reconciliation of EBITDA and Adjusted EBITDA

Three months ended

Nine months ended

September 30,

September 30,

In thousands (unaudited)

2012

2011

2012

2011

Net income (loss) attributable to A. H. Belo Corporation

$

1,483

$

(135)

$

(2,148)

$

(13,684)

Addback:

Depreciation and amortization

7,528

8,696

25,609

27,155

Interest expense

128

132

506

510

Income tax expense

501

489

1,286

4,538

EBITDA (1)

9,640

9,182

25,253

18,519

Addback:

Pension expense

849

1,598

2,897

6,912

Adjusted EBITDA (1)

$

10,489

$

10,780

$

28,150

$

25,431

(1)

EBITDA is calculated by adding depreciation and amortization, interest expense and income tax expense recorded to net income (loss) attributable to A. H. Belo Corporation. Adjusted EBITDA is calculated by adding pension expense, non-cash impairment expense and net investment-related losses recorded to EBITDA.

Neither EBITDA nor Adjusted EBITDA is a measure of financial performance under GAAP. Management uses EBITDA, Adjusted EBITDA and similar measures in internal analyses as supplemental measures of the Company's financial performance and to assist with performance comparisons against its peer group of companies and for operating decisions. EBITDA or similar measures are also common alternative measures of performance used by investors, financial analysts and rating agencies to evaluate financial performance. Neither EBITDA nor Adjusted EBITDA should be considered in isolation or as a substitute for cash flows provided by operating activities or other income or cash flow data prepared in accordance with GAAP, and these non-GAAP measures may not be comparable to similarly-titled measures of other companies.